Defending real estate

July, 2017

It’s an age-old question: which is a better investment — property or shares. Angus Raine gives some reasons why property is a better investment than shares. Last month the value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 3.1% in May 2017. If the Australian real estate market copped a monthly loss of this magnitude, there’d be hell to pay in the media.

For what it’s worth, the average for our combined city markets dropped by 1.1% in May, although it’s up more than 8% year-on-year, according to real estate data provider, CoreLogic.

It strikes me that with plenty of experts tipping rocky times ahead for shares that it’s an opportune time to remind investors why bricks and mortar makes for an excellent investment.

For starters, owner-occupiers dominate the real estate market, which means that if investors leave it in large numbers, it won’t necessarily collapse. This unique situation helps manage down the volatility in the property market. On the flipside, a mass exodus of skittish investors from the ASX would be disastrous for that market.

For what it’s worth, the value of the national housing market reached a massive $6.7 trillion at the end of 2016. There are 9.7 million residential properties in Australia. By comparison Australia’s superannuation pool is worth $2.1 trillion and listed equities $1.7 trillion.